SINGAPORE/LONDON — The U.S. dollar held steady on Tuesday as markets assessed the likelihood of a Federal Reserve interest rate cut in December, following recent dovish remarks from policymakers. Meanwhile, the Japanese yen stayed weak, with traders alert for possible government intervention.
Fed Governor Christopher Waller said on Monday that softening labor market conditions support another quarter-point cut next month, though future moves will depend on delayed economic data after the government shutdown. His comments echoed those of New York Fed President John Williams last week.
Market pricing now reflects an 81% probability of a December rate cut, sharply higher than 42% just a week earlier, according to CME FedWatch. The dramatic shift highlights the uncertainty caused by the lengthy shutdown, which only ended on Nov. 14.
Despite the renewed rate-cut bets, the dollar has been largely unaffected. The euro was last at $1.1530 after slight gains, and the British pound rose around 0.2% to $1.3115. The U.S. dollar index stayed firm at 100.13, retaining last week’s nearly 1% advance.
ING currency strategist Francesco Pesole said year-end portfolio adjustments ahead of Thanksgiving may be preventing further dollar weakness. But he warned the currency looks “too strong” relative to rate differentials and may face downside risk unless expectations turn more hawkish.
Fed officials remain divided as they await a full set of economic indicators. Broader market sentiment was also helped by improving U.S.-China ties, after President Donald Trump said relations were “extremely strong” following a call with Chinese President Xi Jinping.
Yen still vulnerable
Despite limited dollar movement, the yen continued to struggle, trading at 156.51 per dollar — close to last week’s 10-month low of 157.90. Investors are watching closely for potential yen-buying intervention from Tokyo, as the currency has weakened by nearly 10 yen since fiscal dove Sanae Takaichi became Japan’s prime minister.
Pesole noted that thinner liquidity around the U.S. holiday could offer a favorable window for the Bank of Japan to step in after a natural pullback in the pair. Upcoming U.S. retail sales and producer price data may provide that catalyst, though likely not today, he said.
Elsewhere, the New Zealand dollar slipped to $0.5595 ahead of an anticipated rate cut by the Reserve Bank of New Zealand on Wednesday, while the Australian dollar eased 0.15% to $0.6453.
Bitcoin also remained under pressure, falling 1.4% to $87,519.91 and marking a nearly 20% drop so far this month.
Click here for more on Finance and Investing
